david rigby

Clarity is always important. Consider this: an ambiguous plan provision will generally be interpreted (by IRS, DOL, courts) in favor of the participants. This is the reason ERISA requires a plan document be in writing.

It appears to me that Mike's "Yes" refers to your quesiton "Does 411 prevent the lump sum amount from being lowered in this manner?" I agree with Mike. The facts of this situation are similar to the Supreme Court decision in Central Laborers vs. Heinz a few years ago.

Lesson for whether or not to amend the plan prospectively?

Some employers might not use hours because there is logisitical difficulty in tracking hours, especially if multiple locations are involved. While adding hours to the plan definition may solve your problem, just make sure you have the administrative tools to handle it.

There may be other issues when comparing a terminated plan (presumably with rollover to IRA) vs. frozen plan. For example, the bankruptcy protections differ for IRA vs. qualified plan.

This is likely a matter of understanding what the plan says. It's possible the plan uses a more generous provision than is required. But, it's not likely. Might need an independent review of the provision, from a pension actuary or an ERISA attorney.

Plan termination is expected to be an orderly and time-bound process. Regulatory oversight expects it to be completed without unreasonable delay; while not an absolute, this usually means within 12 months. (That does not mean you can, just because you want to, stretch it out to 12 months if there are no impediments.) It may be reasonable to pay out lump sums sooner than other payments, based on administrative convenience, but delaying the purchase of annuities by multiple years will (likely) fail the "smell test". Taking such action could produce a regulatory conclusion that the plan was not terminated, and might require reversing any actions already taken.

Yes, of course this should be included in funding. The Plan owns the asset and still has the liability. However, be very careful about the "post-NRA adjustments". My guess is they should be zero (assuming the plan provisions are approximately what all other plans use).

Wild guess: the record-keeper thinks that one or more of the employee records is invalid because it matches to someone else already in their database. That's a pretty good clue that an employee record uses a "borrowed" SSN, but (and this is important) it does not determine which matching record is invalid. It's possible the existing record is not valid, or prehaps both. Here is a related discussion: http://benefitslink.com/boards/index.php?/topic/53083-two-participants-with-the-same-ssn/

Call me skeptical, but I believe there is hidden other motivation for this idea, and it's likely an attempt to minimize taxes.

Don' assume one of them is lying. Might be both!

Indeed it does. Click on "Monthly Yield Curve Tables", then click on "Recent Yield Curve Spot Rates". This will open a spreadsheet.

Yes. http://www.irs.gov/Retirement-Plans/Interest-Rates-Tables

Is the trust the beneficiary of the policy? Does the plan define the death benefit in relation to the policy or to some other formula?

Strongly agree with comments about avoiding insurance as the primary funding mechanism for the plan. When you engage an actuary, select one (or more) who has experience similar to your situation (ie, small plans). The properly experienced actuary will also be able to recommend 2 or 3 similarly experienced attorneys that you might consider. Your actuary will guide you in discussing what death benefit to include in the plan. The answer to that might require the plan to include some life insurance as part of its investment, but not the main mechanism for funding (ie, the death benefit is ancillary to the main purpose of the plan, which is to save money for retirement). BTW, you are almost a prime candidate for a DB plan (a "prime" candidate is just a few years older than you), so your exploration of this option is very good.

Don't assume a Distress Termination is available. Review the definition and you will liberal use of the word "bankruptcy".

Don't forget the high-25 limitation.

To be precise, the law does not prevent discrimination, but places limits on it. Again, this is what pension law thinks of the fairness concept.

Congress has intent?

Often, the definition is closer to W-2 plus (both 401k and 125) deferrals. May also exclude "fringe benefit costs" normally included in W-2, such as imputed value of life insurance.

IRS Notice 2013-11, released 02/11/2013 http://www.irs.gov/pub/irs-drop/n-13-11.pdf

Let's not forget about the future explosion in healthcare costs. While some people continue to believe the "Affordable Care Act" (if ever there was a misleading title, that's it), those people don't live in the real world. The tax dollars needed to pay for the healthcare promises will grow dramatically; Congress will look at the "tax spending" of qualified plans. Most likely, the first change will be lower deductions. Remember how most employees saw decreases in benefits when the 1993 changes restricted a few (ie, the decision-makers)? Secondly, they will seek ways to tax more of the build-up of QP assets. Eventually, they will wake up and stop the growth of tax-free accumulation in Roth IRAs.

First, does the plan define the death benefit as PVAB? any alternative forms of distribution? But, more to the point, does the plan answer your quesiton?

Agreed, but I suggest the reduction in contributions will be two-sided: both EE and ER.

Isn't "Plan Year" the important thing here?